There’s a lot of questioning and online pushback happening in Bloomington-Normal right now concerning the arcane subject of municipal electricity aggregation.
It comes as the City of Bloomington and Town of Normal have sent notices that per kilowatt hour rates for electricity will go up about 40% this summer for residents who stick with the negotiated rate the Twin Cities and 18 other municipalities negotiated with energy supplier Constellation Energy.
It's essentially a group plan for residential electricity customers. Corn Belt Energy co-op customers are not affected by this change and their rates will be different.
Why aggregation?
How did the business of cities and towns negotiating with power companies get started anyway?
It goes back a few decades when state lawmakers loosened rules to allow individuals customers to choose their own electricity providers. It pushed what power companies have done with each other since the 1930s down to individuals. They "wheel" electricity from electricity generators across the distribution grid to various places where it’s needed.
In a completely open marketplace, there were problems. The subject is complex and individual residents often operated at an information deficit that hurt their ability to make informed choices. Bloomington and Normal became involved in negotiating electric rates for their residents after voters approved a referendum to that effect in 2012, said Normal City Manager Pam Reece.
“We contract with a consultant who basically functions as a broker to get electric rates," said Reece. "It gets bids on electricity, and then we enter into a contract with an electric provider, and we do that through a consortium so Normal and Bloomington and 20 other municipalities work together to coordinate our buying power.
"We have, combined, over 40,000 customers that would use the power source. We think that through the buying power of 40,000 customers and 20-plus municipalities that were able to negotiate, hopefully, [we get] better rates than ordinarily a resident would receive.”
Market correction
A 40% increase is a big jump — from 7.89 cents per kilowatt hour to 10.89 cents per kilowatt hour effective with the June meter readings on bills paid in July. It’s being called a market correction, and Reece said the size of the increase has not been seen before.
“In the state of Illinois, municipal electric aggregation programs are quite common. The Town of Normal is one of over 530 municipalities or local governments in the state of Illinois that use aggregation to lock in rates,” said Reece.
Over the last decade, she said, the municipally negotiated rate has been more than 14% lower than what a resident would have paid Ameren or another company in the open marketplace.
"The additional thing about going through an electric aggregation program is these rates are locked in for a year. Those residential customers and small business customers that choose to stay in the aggregation program will know their rate for the next 12 months. Some people do find value with that," said Reece.
It’s not yet known what standard rates for other providers will be come June.
Reece said the town and city usually negotiate 2 or 3-year contracts for electricity, but since this one is a hefty increase the municipal group chose to make it a one-year deal they hope to improve upon next year.
Individual residents can opt out of the group-buy and navigate choosing an electricity provider on their own.
“Selecting an electric utility supplier is complicated. It really is. The best source that I would direct people to is the Town of Normal website. There's a tab for residents and then a specific link towards electric aggregation on that page. We provide information about other utility companies and what's basically legitimate process for that,” said Reece, who noted that municipalities do not send anyone to the residents' doors.
Be careful
Some vendors do market that way by offering to scan a person’s electric bill then and there and offer a competing price for someone to opt out of aggregation. Some of those providers can be less than reputable.
Last week, Illinois Attorney General Kwame Raoul reached a $12 million settlement with Direct Energy Services LLC [Direct Energy]. It resolved allegations that “the alternative retail electric supplier [ARES] engaged in fraudulent, unfair and deceptive business practices to mislead Illinois consumers into paying millions of dollars more for electricity than consumers who stayed with their default public utility,” said a news release.
At times, the company charged customers rates that were 230% higher than the municipally negotiated rates, said the attorney general.
“Companies like Direct Energy must be held accountable for taking advantage of consumers with misrepresentations and false promises of lower prices,” Raoul said.
The settlement requires the company to stop doing what the attorney general said were several bad things, including:
- Enrolled consumers without their knowledge or consent;
- Misrepresented that consumers would save money;
- Misrepresented an affiliation with the public utility or government;
- Unfairly and deceptively obtained consumers’ account information;
- Misrepresented a “price protection” through a state or utility “program;” and
- Failed to disclose new rates and new terms.
Raoul’s office has sued or investigated a number of other electric providers for similar conduct in recent years. Those include Southeast Energy Consultants LLC, Residents Energy LLC, Liberty Power Holdings LLC, Major Energy Electric Services LLC, Eligo Energy IL LLC, Realgy LLC, Atlantic Energy MD LLC, Palmco Power IL LLC, IDT Energy Inc, Sperian Energy Corp., and Mega Energy of Illinois.
Reece urged residents to go to reputable sources to have their questions answered.
“We even include phone numbers on our website. When individuals receive the letter from us and Constellation Energy in the mail, it will also have phone numbers, and we encourage people to call and ask those kind of questions, and the subject matter experts will provide information,” she said.
